The Australian and New Zealand Dollars sank in otherwise quiet overnight trade. The move appeared to be corrective, reflecting profit-taking after the two currencies outperformed against their major counterparts yesterday after China announced an ambitious set of exchange rate policy reforms. The move downward dutifully waited to commence after the outcome of a speech by Fed Chairman Ben Bernanke to the Economists Club in Washington DC. The central chief offered nothing particularly new, retreading familiar territory on the need for continued accommodation via low interest rates being maintained for a while after the QE program is concluded.

The release of minutes from November’s Bank of England meeting headlines the economic calendar in European hours. The markets have been pricing in a hawkish shift in the central bank’s rhetoric since the publication of the Quarterly Inflation Report last week, with the British Pound nearly 1 percent higher as of the Tuesday close. A similar message in the text of the Minutes won’t offer anything especially surprising, meaning Sterling is unlikely to see significant follow-through from any near-term upside momentum. Rather, outsized volatility risk is on the dovish side of the spectrum in the event that the MPC voting pattern or any of the commentary calls recent optimism into question (though such a scenario seems highly improbable).

On balance, currency markets are likely to wait to see minutes from October’s FOMC policy meeting before committing to a clear directional bias. Investors will carefully comb through the text to help establish the extent to which Fed officials saw fiscal drag from October’s US government shutdown as a reason to delay a cutback in asset purchases. Recalling the ultimately unfounded fears of fiscal retrenchment from the payroll tax hike and “sequester” spending cuts on the US recovery earlier this year, Ben Bernanke and company are unlikely to have materially augmented their position, at least absent concrete data arguing otherwise. In fact, comments from New York and Philadelphia Fed Presidents Bill Dudley and Charles Plosser hinted as much yesterday. Such an outcome may boost the US Dollar, sparking renewed upward momentum as prices consolidate at chart support.